the STAT PACK

Southern Nevada Economic Metrics

From Stat Pack co-publisher RCG Economics, below is the latest data on the SoNev economy. If you have any questions, don’t hesitate to email RCG chief John Restrepo at jrestrepo@rcg1.com. Also, be sure to sign up to receive our Friday Fact Pack (which receives rave reviews from our readers for its winning combination of great information and humor) over there to the right. —–>

For the past 5 months months the RCG Employment Index’s 12-month moving average (“12MMA) has ticked up by 0.1, reaching 98.4 in April. Compared to April 2016, the Index is up 1.2 points. For nearly 6 years the Index has been steadily climbing and is now less than 2 points below the November 2006 peak of 100.

In April 2017 the 12MMA of Clark County’s headline unemployment rate was 5.4% after dropping 0.1 every month for a year, putting it 1.2 points lower than the April 2016 rate of 6.6%. It reached its lowest level in October 2006 when it was just 4%.

Again, the April rate of job growth in the Las Vegas MSA did not change, holding at 3.3% (12MMA) for 5 months straight. Job growth in the region and at the national level is suffering from the same effect: According to the Brookings Institution, the slowdown is mainly due to decreasing demand for unskilled labor.

In Q1 of 2017 Nevada’s U-3 and U-6 unemployment rates have both declined in by 0.3 points for the second quarter in a row. The U-6 rate fell from 12.2% in Q4, 2016, to 11.9% in Q1, 2017. The U-3, or headline rate, fell to 5.6% but is still tied with West Virginia for the 6th highest in the nation. Regarding the U-6 rate, Nevada is the third highest after New Mexico and Alaska.

With housing demand strong, and commercial demand improving, in the Las Vegas MSA, the amount of construction jobs continues to grow. Construction workers in Southern Nevada numbered 57,167 in April 2017 (12MMA), up 4,443 (8.4%) from April 2016. Construction employment has now grown for 58 straight months and represented 6.3% of the region’s job-base at the end of April. April’s jobs are still far below the November 2006 peak of 108,833 when they accounted for 11.4% of all MSA jobs. It is unlikely we will see the pre-recession construction job share in the foreseeable future. The number of construction jobs was artificially inflated due to the real estate bubble. The industry is much more stable today than it was then.

On a 12MMA basis, the number of visitors to Clark County in April hardly changed from the previous month with less than 0.1% growth. When compared to April 2016, the YOY change was only 0.4%. 2017’s four-month visitor total of 14.3 million is slightly higher than 2016’s 14.2 million for the same four months. Visitor growth has slowed considerably in 2017 with a YOY visitor growth rate average over these first four months of only 0.7%. The month of greatest YOY growth since October 2005 was September 2011, when visitor volume grew by 4.5%.

In April, Clark County’s monthly convention attendance (on a 12MMA basis) fell -1.31% to 517,623 attendees from 524,514 in the previous month. Compared to April 2016, convention attendance was up 1.6%, the smallest YOY growth since August 2015. In 2016, YOY growth averaged 14.3%. The 12MMA monthly peak attendance of 529,185 was in January 2007. April’s attendance represented almost 98% of the peak.

Convention attendance saw significant growth in 2016 with 10 months of greater than 10% YOY growth. However, YOY growth has been steadily slowing since the recent peak in July 2016 of 20.2%. This is likely due to capacity issues in the market and convention attendance has now recovered to a stable level.

In April 2017, the 12MMA of hotel revenue per available room (RevPAR) in Clark County was $114.43, a decrease of -$0.28 (-0.24%) from the previous month. Compared to April 2016, RevPAR is up $6.20 (5.7%) and continues on its streak of YOY growth that began in December 2010. It now represents 96% of the RevPAR 12MMA peak of $119.43, which occurred in December 2007.

Note: RevPAR is a performance metric in the gaming and lodging industry. It is computed by dividing a resort’s or hotel’s room revenue by the room count and the number of days in the period being measured.

On a 12MMA basis gaming revenue net of baccarat increased from March by 0.42% to $720.4 million in April 2017. YOY growth in April was higher than it has been in over a year at 3.7%. April’s gaming revenues net of baccarat were 86% of the October 2007 peak of $834.4 million.

The net baccarat revenues are largely comprised of slot revenues, which generally reflect wagering of typical gamblers, especially U.S. gamblers. Slot revenues continue to remain lackluster for two reasons: constrained disposable income, which is now finally improving, and changing spending patterns, especially among adults under 35. Millennials prefer to spend their money at clubs, pool parties, restaurants, show experiences and shopping rather than gambling.

According to Home Builders Research, in April, total (new and resales) Clark County home closings, which numbered 4,694 (12MMA), were up 0.27% from the previous month. On a YOY basis, total home sales were up by 9.6% compared to April 2016. While resales are doing well with a YOY increase of 7.4% to 3,980, new homes sales are very strong with a YOY increase of 23.6% to 714. After more than a year of decreasing new home sales, there have now been 22th straight months of growth. The last 3 months have seen new home sales growing by more than 20% from the year before. Total home sales are not far from the most recent monthly peak in July 2012 of 4,777 sales. April’s count was 98% of the peak.

Per Home Builders Research, the 12MMA median home price (new and resale) in April 2017 was $227,393, a 7.7% gain over April 2016. The peak of $305,333 was recorded just over 10 years ago in February 2007. April’s estimate was 74% of the peak price.

The median new home price was up 4.4% from the previous year, reaching a new peak in April of $327,754. The previous peak of $327,066 occurred in February 2007.

The median resale home price was $209,232 in April, a 7.4% increase during the last 12 months. The peak of $286,833 was 10 years ago in April 2007. This means that the current resale price has recovered approximately 73% of its pre-recession peak. For comparison, the median resale home price in the Reno-Sparks MSA was $312,842 (12MMA).

Toward the end of 2016 the combined rate of home appreciation for new and resale homes declined from an average 10.1% YOY growth during the first four months to 6.4% in December of that year. It appears to be back on the rise with steady growth during the last 3 months. The annual peak of 35.8% growth occurred in February 2005.

The 12MMA 30-year fixed rate mortgage in the Western Region increased slightly by 0.04 points to 3.67% in May after 3 consecutive months of decreases to begin 2017. The 10-year peak of 6.4% occurred in October 2006. The 30-year fixed rate mortgage should remain relatively low, but will likely to go up because of Federal Reserve actions.

The 12MMA Case-Shiller home price index for the Las Vegas MSA reached 152.9 in March 2017, a rise of 5.8% compared to March 2016. The US index in March was 191.3. The Las Vegas index peaked at 233.2 in December 2006. The latest index is 65% of the peak. The greatest positive annual change (44.5%) in the Las Vegas index occurred in March 2005, while the greatest negative change (-31.8%) occurred in August 2009. These trends are similar to those reported by Home Builders Research.

The vacancy rate for the commercial markets was up across the board in Q1, 2017, yet on a 4-quarter moving average basis the results were mixed.

The Industrial market vacancy rate increased by 0.3 points to 5.5% in Q1. On a 4-quarter moving average basis the increase was only 0.1, from 5.2% to 5.3%.

The Spec Office vacancy rate increased by 0.1 points to 20.3% in Q1. On a 4-quarter moving average basis the vacancy rate was unchanged from Q4.

Anchored Retail saw vacancy increase by 0.3 points from 10.5% to 10.8%; however, on a 4-quarter moving average the Retail rate actually fell 0.2 points to 10.9%.

On a 4-quarter moving average basis, this is the 2nd increase in a row for Industrial, though its vacancy rate remains well below the other markets. Anchored Retail market vacancy is more than double the Industrial market, while the average Spec Office market vacancy rate is nearly double Anchored Retail.

As of May 1, 2017, the prime rate increased from 3.5% to 4%. The 10-year treasury bond rate fell by 0.12 points to 2.3%. The 30-day LIBOR increased by 0.1 points to 0.99%. Lender rates were mostly down and remain relatively low, which continues to benefit the commercial real estate industry in terms of the cost of borrowing. The challenge for Las Vegas: filling a large amount of vacant space, especially in the office market, when office job growth is moderate; and companies remain hesitant about expanding their space footprint.

Despite slowing visitor growth, increased local resident and business spending in Nevada and Clark County keeps pushing taxable retail sales to new highs. March 2017 set another high mark with $3.38 billion in sales, which is still up a healthy 4.7% from last year, but the YOY change is slowing as the local economy reflects a bit of uncertainty due to national and global trends and e-ecommerce continues to spread.

Current taxable sales are the highest ever recorded by the State of Nevada on a nominal basis (not inflation-adjusted). As such, they have boosted local and state government budgets. Steadily improving local, regional and national job markets are key to this improvement. This is especially true regarding the health of regional and national economies. They are primary drivers of visitors and convention attendees to Las Vegas, which is ultimately reflected in tourism spending in the region.

Las Vegas MSA 12MMA average weekly earnings (not inflation-adjusted) continued to climb steadily in April 2017. It was up another $3 after the previous month’s $4 jump, reaching $759. The 12MMA was up $28 (3.7%) from April 2016.

On an inflation-adjusted, YOY basis, earnings increased 2% in April 2017 compared to April 2016 to $659 (in 2007 dollars). Las Vegas’ average weekly real wage is now $92 (12.3%) below the most recent inflation-adjusted peak of $751 that occurred more than 9 ½ years ago in August 2007. The trough occurred in February 2012 at just over $616, so Las Vegas is still much closer to the trough than the peak.

The number of average weekly hours worked in Las Vegas (Clark County), on a 12MMA basis, stalled again in April at 33.4, though the general trend has hours increasing, albeit slowly. On a YOY basis, average weekly hours are up 0.3 points from April 2016. The 7-year peak of 36.9 hours occurred in October 2008. As we’ve noted, weak average hours worked have been accompanied by a declining headline unemployment rate. In Q1-2017, the U-6 unemployment rate recorded another 0.3 point drop, which means we may see further improvement in weekly hours worked as business reliance on part-time workers decreases.

Implication: Despite decreasing headline and U-6 unemployment rates, many companies continue to depend heavily on part-time workers and independent contractors. For this reason, Nevada’s U-6 unemployment rate (including discouraged and part-time workers), remains among the nation’s highest at 11.9% as of Q1, 2017.

As of June 6, the price of regular unleaded gasoline in the Las Vegas MSA fell $0.02 (-0.6%) from the month prior, resulting in a per gallon price of $2.66. Compared to this time last year, the price of regular unleaded is $0.22, or 9.1%, more.

According to AAA, “Low combinations of gasoline storage and production levels are generating concern in the region (West Coast). In Northern California, planned and unplanned refinery maintenance has negatively affected gasoline production. In May, imports helped the West Coast meet supply demands, but prices could continue to increase in the region until refiners resume normal operations.”

Electric meter hookups’ 12MMA in April 2017 reached 800,569. Total hookups were up 1.7% over April 2016. The annual growth rate has slowly fluctuated up from 1.7% and back down over the last 19 months. This hints at stable population growth and household formations in the Valley. The annual peak growth rate occurred March 1990 at 10.5%.